Capital One Financial Corporation

Good day and thank you for standing by. Welcome to the Capital One Q1 2024 earnings call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Norris, Senior Vice President of Finance. Please go ahead.

Thanks very much, Josh, and welcome to everyone. We are webcasting live over the internet this evening. To access the call on the internet, please log on to Capital One's website at CapitalOne.com and follow the links from there. In addition to the press release and financials, we've included a presentation summarizing our first quarter 2024 results. With me this evening are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer, and Mr. Andrew Young, Capital One's Chief Financial Officer. Rich and Andrew are gonna walk you through this presentation. To access a copy of the presentation and press release, please go to Capital One's website and click on Investors, then click on Financials, and then click on Quarterly Earnings Release. Please note that this presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion in the materials speak only as of the particular date or dates indicated in the materials, and Capital One does not undertake any obligation to update or revise any of this information, whether as a result of new information, future events, or otherwise. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements For more information on these factors, please see the section called Forward Looking Information in the Earnings Release Presentation and the Risk Factors section of our annual and quarterly reports accessible at Capital One's website and filed with the SEC. And with that, I'll turn the call over to Andrew. Mr. Young.

Thanks, Jeff, and good afternoon, everyone. I will start on slide three of tonight's presentation. Capital One earned $1.3 billion, or $3.13 per diluted common share. Included in the results for the quarter was a $42 million additional accrual for our updated estimate of the FDIC's special assessment. Net of this adjusting item, first quarter earnings per share were $3.21. Relative to the prior quarter, Period-end loans held for investment decreased 2% and period-end deposits increased 1%. Both average loans and average deposits were flat. Our percentage of FDIC-insured deposits remained at 82% of total deposits. Pre-provision earnings in the first quarter increased 13% from the fourth quarter or 6% adjusting for the impacts of FDIC special assessments in both quarters. Revenue in the linked quarter declined 1%, largely driven by lower non-interest income. Non-interest expense decreased 6% on an adjusted basis, driven by declines in both operating and marketing expenses. Our provision for credit losses was $2.7 billion in the quarter, a decrease of $174 million compared to the prior quarter. The decrease was driven by $257 million lower net reserve build, partially offset by an $83 million increase in net charge-offs. Turning to slide four, I will cover the allowance in greater detail. We built $91 million in allowance this quarter bringing the balance to $15.4 billion, an increase of less than 1% from the fourth quarter. The slight increase in allowance balance was driven by modest builds in our auto and domestic card portfolios. Our total portfolio coverage ratio increased 11 basis points to 4.88%. I'll cover the drivers of the changes in allowance and coverage ratio by segment on slide five. Our baseline economic forecast modestly improved this quarter compared to what we assumed last quarter, which generally aligns with consensus. We continue to consider a range of economic outcomes in our reserving process. In our domestic card business, the allowance coverage ratio increased by 22 basis points to 7.85%. The increase in coverage was primarily driven by the denominator effect of the runoff of the fourth quarter's seasonal outstandings. In our consumer banking segment, the allowance increased by $46 million, resulting in a seven basis point increase to the coverage ratio. The allowance increase was primarily driven by a higher level of originations in the auto finance business. And finally, our commercial banking allowance decreased by $7 million, primarily driven by portfolio contraction. Coverage ratio increased by one basis point to 1.72%. Turning to page six, I'll now discuss liquidity. Total liquidity reserves in the quarter increased to $127 billion, about $7 billion higher than last quarter. Our cash position ended the quarter at approximately $51 billion, up about $8 billion from the prior quarter. The increase in cash was driven by continued strong deposit growth in our retail banking business and the seasonality of our card balances. Our average liquidity coverage ratio during the first quarter remained strong and well above regulatory minimums at 164%. Turning to page seven, I'll cover our net interest margin. Our first quarter net interest margin was 6.69%, four basis points lower than last quarter and nine basis points higher than the year ago quarter. The quarter-over-quarter decrease in NIM was largely driven by the impact of having one fewer day in the quarter. Modestly higher asset yields were mostly offset by higher funding costs in the quarter. Turning to slide eight, I will end by discussing our capital position. Our common equity tier one capital ratio ended the quarter at 13.1%. approximately 20 basis points higher than the prior quarter. Strong earnings and lower risk-weighted assets more than offset the impact of Cecil Faison, dividends, and share repurchases. We repurchased approximately $100 million of shares in the first quarter. Our repurchase activity in the quarter was impacted by blackout restrictions and daily purchase volume limitations related to the announcement of the Discover transaction. With that, I will turn the call over to Rich. Rich?